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Estimate the bond price

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Question - A government bond that trades in the market has the following characteristics:

Remaining life: 5 years

Coupon rate: 4%

Coupon frequency: Annual

YTM: 5%

Please answer the following questions.

A. Estimate the bond price.

B. Estimate the new bond prices in case yield increase by 1% or decrease by 1%, Discuss the results.

C. The macaulay and modified duration

D. The convexity

E. The appropriate price change using duration and convexity, discuss the results.

Reference no: EM132844865

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